The G-20 Summit in Toronto: A Global Response Through the Multilateral Development Banks to Promote Sustainable Development
The United States, working with its G-20 partners, has forged a strong and swift response to address global challenges.
- The multilateral development banks have served as first responders to the world’s poorest following the financial crisis, providing $222 billion in financing. The G-20 has been instrumental in recapitalizing and reforming these institutions so that they can effectively tackle 21st century development challenges.
- At the London G-20 Summit in 2009, President Obama announced a global food security initiative that strategically invests in agricultural and market development. The United States, which launched the “Feed the Future” initiative in May 2010, has led international efforts to review and support nine comprehensive country strategies, collaborate in the establishment and initial capitalization of the World Bank-hosted Global Agriculture and Food Security Program, and launch a new research and development program.
- The G-20 countries and other key stakeholders are standing up a global SME Finance Challenge, a unique financial inclusion effort aimed at helping small- and medium-sized entrepreneurs grow their businesses.
Multilateral Development Banks: A Reform Agenda and New Resources
- First Responders in a Crisis: The multilateral development banks (MDBs) acted as first responders in the financial crisis. They are on track to deliver on their commitment—made to the G-20 in London in April 2009—to boost lending by $100 billion above planned pre-crisis levels in the years 2009-2011. This financing has been critical to global stabilization efforts and a key reason we are now seeing signs of renewed economic growth around the world.
- A Robust Reform Agenda: Shareholders have agreed to a transformative reform agenda that includes: a focus on the core challenges and priorities of supporting economic growth, lifting the lives of the poorest, promoting global solutions to address climate change and food security, and rebuilding in the wake of conflict and other natural disasters; a more effective use of capital through stronger budgetary discipline, ensuring loan prices cover costs, and ensuring substantial annual transfers of income from middle-income loan facilities to the facilities for the poorest; greater accountability through new disclosure policies and inspection mechanisms; and a stronger focus on results, in order to reward the quality rather than the quantity of lending to improve development impact.
- New and Replenished Resources: Based on this strong reform agenda, G-20 shareholders have agreed to increase MDB capital by more than $300 billion, boosting future lending by $20 billion annually. The G-20 also supports robust replenishments this year for the International Development Association and the African Development Fund.
Global Agriculture and Food Security Program: A Global Response Against Hunger
- Early Strides Against Food Insecurity: Less than a year since the G-20 called for a multilateral fund to address global hunger, the Global Agriculture and Food Security Program (GAFSP) has made its first grants totaling $224 million to five low income countries. These first grants are expected to benefit more than 2 million people in rural areas, demonstrating the commitment of the international community to forge a strong, swift, and coordinated response against global food insecurity.
- U.S. Leadership: As part of the Obama Administration’s Feed the Future initiative, the United States has led cooperation with G-20 countries, the World Bank, and other multilateral organizations to establish this innovative new fund to help millions of poor farmers grow more and earn more so they can lift themselves out of hunger and poverty.
- A Global Membership: The fund has mobilized commitments of nearly $900 million. The United States has pledged $475 million to the fund, of which $67 million has already been contributed. Other contributors include Canada ($230 million), Spain ($95 million), South Korea ($50 million) and the Gates Foundation ($30 million).
- Swift Implementation: Sixty low-income countries have been invited to submit proposals with two submission deadlines of June and October 2010. To date, the fund has allocated grants to Bangladesh ($50 million), Haiti ($35 million), Rwanda ($50 million), Sierra Leone ($50 million), and Togo ($39 million). These investments will increase agriculture productivity, improve irrigation systems and link farmers to markets.
- Inclusive Governance: The fund’s main decision making body (steering committee) consists of an equal number of developing countries and donors as voting members. Developing countries such as Haiti, Bangladesh, Sierra Leone, Senegal, and Mongolia have played a central role in the design of the fund. The steering committee also has three seats for civil society organizations.
Financial Inclusion and the SME Challenge: Supporting Financial Access for Small- and Medium-Sized Enterprises in Emerging Economies
- Access to Finance for Often-Excluded Firms: Small- and medium-sized enterprises (SMEs) play a major role in economic development and are often the single largest source of job creation, particularly in emerging economies. Lack of access to finance, however, is a major obstacle to these firms’ growth. Only an estimated 20 percent of small firms in low-income countries have access to credit. SMEs are often too small to attract commercial bank or investor interest, but too large to benefit from microfinance products.
- SME Challenge: At the Pittsburgh Summit, Leaders called for the launch of a global SME Finance Challenge, a unique financial inclusion effort aimed at helping small- and medium-sized entrepreneurs grow their businesses. The aim of the Challenge is to find the best models worldwide for public-private partnerships that catalyze finance for SMEs and to give the creators of those models a chance to solicit financing.
- Proposals are welcome from private financial institutions, private investors and companies, socially responsible investors, foundations, and civil society organizations. The best proposals will be selected as winners, including at least one from each of the world’s six regions. Proposals will be judged by a panel of five independent experts and three G-20 representatives.
- Challenge winners will be invited to the G-20 Summit in Seoul in November. In Toronto, G-20 Leaders committed to mobilize the funding needed to implement the winning proposals, including from the multilateral development banks and interested bilateral donors. The World Bank and all of the major regional development banks are committed to supporting this effort.
- A Unique Partnership of Key Stakeholders: The Challenge is a unique, cooperative effort between G-20 countries and a partnership of the Rockefeller Foundation and Ashoka/Changemakers team -- two nonprofit organizations with experience in running competitions. The Challenge has strong and broad support across G-20 countries and from private stakeholders in SME finance worldwide.